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(Solution) United Technology Company expensed $20 million of research and development costs

Several years ago, United Technology Company expensed $20 million of research and development costs that eventually resulted in a patent. Earlier this year, United was acquired by its largest competitor, Spirit Incorporated. At the acquisition date, it was determined the patent had a fair value of $50 million. What amount, if any, should Spirit report for the patent in its balance sheet on the date of acquisition?
a. $0.
b. $20 million.
c. $50 million.

Solution

To determine the amount that Spirit Incorporated should report for the patent in its balance sheet on the date of acquisition, we need to consider how intangible assets like patents are accounted for during acquisitions.

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